A human rights watchdog has asked the European Commission to assess the legality of software being used to analyse file-sharing in the UK.
The software in question is called CView and will be used by ISP Virgin Media to identify legal versus illegal traffic on its network.
The EC has said it will monitor the use of the software, following a complaint from Privacy International.
Virgin Media countered that the software posed no risk to privacy.
Privacy International has concerns about the software, designed by monitoring firm Detica.
It utilises so-called deep packet inspection, which means that it can identify actual file-names, making it possible to accurately find out what content is legal and what is not.
According to Alexander Hanff, head of ethical networks at Privacy International, use of such software is in breach of current UK law.
"Under the Regulation of Investigatory Powers Act (Ripa) intercepting communications is a criminal offence regardless of what you do with the data," he said.
Mr Hanff said he would file a criminal complaint if Virgin Media deployed CView.
He said the software is similar to that used by ad firm Phorm, which developed technology to monitor individual's web use in order to better target adverts.
Trials of the technology in the UK have been put on hold while the EC investigates how it was tested.
The UK government is in the process of creating legislation that could see illegal file-sharers identified and, potentially, thrown off the network.
But this software will not do that job, said a spokesman for Virgin Media.
"It was never designed to capture identities. This isn't an answer for that," said Asam Ahmad.
Instead the software will be used to identify how much traffic on its network is illegal.
"We want to understand what we can do to reduce illegal file-sharing. This will tell us things such as the name of the top ten tracks being shared as well as the percentage of legal versus illegal," said Mr Ahmad.
Virgin Media is about to launch its own music service.
Mr Ahmad said no date had yet been set for the trial but told BBC News it will monitor traffic on three peer-to-peer networks notorious for trading illegal as well as legal software; Gnutella, eDonkey and BitTorrent.
He admitted that potentially 40% of Virgin Media's customers could have their data scrutinised and confirmed that it has no plans to inform them beforehand.
He also conceded that it would not be technically difficult to link up deep packet inspection technology with the IP addresses which would identify individuals but stressed that was not the plan currently.
"These mandates have not yet been set and when it comes down to identifying individuals or prosecuting them, that is a role for content providers, not us," he said.
Virgin Media is involved in an ongoing education campaign, which includes sending letters to those identified as downloading illegal content on its network.
Andrew Ferguson, editor of broadband news site ThinkBroadband, said the trial could be "double-edged".
"If Virgin can form a baseline for its 'illegal' P2P traffic, it can see how much effect any legislation has, and perhaps plan better for the letter forwarding side of things," he said.
But he pointed out that Virgin Media is not alone in using deep packet inspection - BT has been doing it for years, he said.
"It is possible they may be doing exactly what Virgin are doing," he said.